To fix the technical debt of a messy finance stack, hire a modern controller.
I recently wrote an article published on LinkedIn and picked up by Medium called The Most Underrated Skill You’re Not Asking Controller Candidates. My friends at Airbase liked it and asked me to expand on the theme as a guest writer to their site. I’m pleased to oblige with this new article.
I have appropriated a term from the software world and use it to describe what many companies’ finance and accounting departments experience. The term is “technical debt” and it refers to sub-optimal coding or design that can exist in a software product. It comes from the agile practice of shipping product before it is perfect or feature complete. On the buy side, it refers to selecting the easy-to-implement narrow solution, instead of a more comprehensive and disruptive one.
The cost of not addressing technical debt.
It’s a fitting term, not only because debt is a finance concept, but also because it acknowledges deficiencies while promising a solution – implied in the concept is the cost that it will take to fix the embedded problems. In finance and accounting, this concept of technical debt exists in relation to our processes for connecting accounting and finance operations to the ERP. Processes have been built around incremental, partial solutions, with an undergirding of manual workflows to bridge the gaps and stitch the myriad solutions together.
The term technical debt is further appropriate for accounting teams when you consider the impact that limited resources have on the bandwidth needed to address technical accounting concepts (usually around revenue recognition, stock-based compensation, or M&A accounting). Complex accounting issues require true expertise but they get tabled because we're focused on the exigencies of keeping the lights on. Even as we close the books every month, we understand they're going to be adjusted because we haven't addressed these technical accounting areas…thereby growing our accounting debt.
The time has come to start reducing this debt, because the cost of inaction is far greater than the cost of replacing inefficient processes. The opportunity cost of resources diverted into manual tasks can be measured by the amount of time freed up to provide higher value-add functions by those professionals to their companies. Deploying our highly educated, trained accounting professionals to focus on technical accounting issues and to contribute insights, analysis, and strategic thinking, instead of data collection and manual reconciliations, is surely an objective we can all share.
Traditional finance and accounting avoids technology.
To solve the problem of the technical debt inherent in many accounting and finance operations, however, requires a different type of skill set than is typically expected from its leaders. We accounting types are notoriously hard working, and used to creating a spreadsheet or a manual workaround to make sure that the books get closed as quickly and accurately as possible. It is perhaps not surprising, therefore, that our solution is to apply elbow grease to a problem. Indeed, in its 2020 survey of hundreds of finance professionals across the U.S., the Fintech company Auditoria confirmed that most companies automate only a fraction of back office functions.
Nearly a quarter of the respondents (23%) are in the "low automation" group, having automated 20% or fewer of critical finance functions. Adding together the two lowest tiers, the majority of respondents (52%) have automated 40% or fewer of back office tasks. A meagre 5% are in the top tier of automation, which they defined as more than 80% of functions automated. These numbers are even more surprising since there are so many software tools designed for accounting and finance. The low adoption rate is, at least in part, due to a deficient skill set around software evaluation and implementation.
Modern Controllers take on technology.
We have entered a period of reckoning where finance teams must not only automate heretofore manual processes, but also rationalize the messy finance stack of disjointed software products that currently define the environment for many finance and accounting teams. This means that the skill sets required from Controllers (and all accountants) have changed. These days, there is a software solution for every single business process, and Accounting Operations is no exception.
The accounting tech stack has evolved and so with it comes the need for a modern-day Controller. Yet there has been little change to the job requirements and the way we recruit for and interview these candidates. If I may quote myself: “The modern-day Controller has to be as much of a systems integrator, as they are a transaction aggregator. They have to be a fluent translator of systems so data can flow accurately.”
The modern-day Controller must evaluate, implement, and integrate systems, which, if done correctly, will provide accurate financial reporting, a high level of analysis, and create resource efficiencies. If done incorrectly, you can expect to waste a lot of time, money, and resources hiring consultants at a premium to achieve these transformations for you, or worse, pay for software that ends up becoming shelfware. We need to reassess how we view the Controller's role and how we evaluate the skills needed for success.
Controller skill sets and experience needed,
A typical job posting for a Controller starts with a focus on management experience, especially building high-performing teams. There would be a requirement for professional qualifications, like a CPA or MBA, and some preference would be expressed for those with experience in the specific vertical of the hiring company. Then there are the standard requirements, like audit (ideally at one of the Big Four), and knowledge of US GAAP, SEC reporting requirements, and SOC regs. There would be mention of soft skills, like leadership, problem solving, ability to deliver strategic business insights and, of course, integrity and good judgement.
This “typical” list of experience and skills doesn’t ever mention demonstrated success at evaluating or integrating systems, yet such knowledge will be a key skill for success of any Controller. Not only would I argue that: “Proven ability to successfully evaluate, implement, and integrate financial systems and tools” should be an essential skill set, I would insist on having it appear at the top of the list, not as a nice-to-have.
Indeed when top finance leader recruiter Rhoda Longhenry, who is a partner at True, was asked this question, she confirmed that VPs of Finance and Controllers are expected to know and understand the tools and tech stacks required to efficiently manage a finance and accounting team. Even the CFOs that she places “need to know how to build a world-class team and systems; technology is part of that.”
A view from the front lines.
In the past year, I’ve implemented at least eight new systems. I’ve decommissioned four, inherited six, and I’m also the primary administrator for a dozen systems in total. The work involved in this is a significant part of my work day and must fit in around the other “traditional” duties of a Controller to get the books closed. For every system we selected, I evaluated two to three competitors to ensure we picked the right tool. I also evaluated another dozen systems for my business partners to ensure that the integrity and reporting of financial data would flow properly from their systems into mine. I can unequivocally attest that demo fatigue is a real thing!
I cannot say how unique my situation may be in a startup or early-stage company; certainly not all Controllers will need to stand up this many new systems. But even as software tools have advanced, many of us have accepted our current tech stack without question. There is a cost to our failure to innovate and reinvent our processes, and it comes in the form of a lot of needless time and effort spent by our teams, and in some cases teams, across an entire company.
Replacing corporate cards with a full spend management platform.
Take corporate credit cards for example: Reconciling credit cards has been the bane of any accounting team. Building spreadsheets and pulling CSV files of charges to get them properly categorized and booked could require half a headcount to hit a timely close. Add to that the legacy mentality of controlling cash flow by extending your net 30 terms, and you load up your AP staff with invoices to process.
New vendors have challenged this way of thinking and have reimagined ways to leverage automation to streamline the credit card process with smart controls, while also reducing staffing needs. Building efficiencies around saving the time of company resources is just part of the value; the oversight that automation provides helps reduce wasted spend. Saving time and money results in a positive, measurable ROI for a system, making the decision to adopt it easier to justify. With the control such a system provides, we have even been able to optimize card use to get additional cash back.
It goes without saying that I, and my team, are of greater value to our company when we spend time on analysing instead of compiling data, and contributing to business strategy instead of month-end tactics. This intangible benefit of operational efficiency is harder to measure but we know that it is there.
Software solutions abound selecting the right one takes skill.
The onslaught of new software will continue as companies develop new approaches to address our pain points and disrupt our accounting tech stack. All you need to do is look at this list of logos in the ecosystem:
Lastly, you don’t need to be a software engineer to understand systems, but you do have to understand how data flows most efficiently from one system to the next. If your Controller is lacking these system skills, it could be costing your company extra to implement and integrate these systems. A three-month implementation turns into six or seven months—a lot of time wasted for a subscription you're paying for. Worse yet, you realize you picked the wrong solution and need to go back to square one. Implementing a new system while maintaining an old one in parallel is never easy, but the modern-day Controller will save you money that you’ll never even realize you saved.
Evaluating new systems.
The accounting tech stack has changed and the new world demands that Controllers be proficient systems integrators. Companies cannot afford to waste time and resources selecting the wrong tool and taking forever to implement them. If you’ve been sleepwalking through your accounting tech stack the last few years without evaluating the new players on the market, it’s likely that you’re making yourself obsolete.
As a CEO/CFO/Recruiter hiring a Controller, you need to dig into a candidate’s systems experience, otherwise you could be paying for that lack of skill and knowledge by way of staff inefficiencies, requiring additional headcount and/or hiring outside consultants to supplement your team. I would focus on questions like these:
- Describe your experience implementing a new system. What challenges did you encounter and how were they resolved?
- How do you evaluate different software tools?
- Have you ever invested in the wrong solution or purchased the wrong tool? How did you correct the error?
- What’s your ideal tech stack for the accounting team? And the finance team?
- What new accounting software tools are you most excited about?
I believe, with this approach, we can continue to modernize our profession and provide more value to the companies we serve. And who knows, we might actually pay off the debt in the system and find accounting software that’s fun to use!
Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all payments – physical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.